AUSTIN, October 9, 2014 – The State of Texas, 49 states and the District of Columbia today announced the resolution of a multistate investigation into wireless carrier AT&T Inc. for its role in cellphone “cramming” – the unlawful practice of placing unauthorized third-party charges on mobile phone accounts. Cramming occurs when third-party content providers enroll and bill mobile phone customers for their services – such as ringtones and recurring text messages containing trivia or horoscopes – without the customers’ knowledge or consent.

Widely recognized as a national leader in efforts to end cramming, the Internet and Privacy team of the Texas Attorney General’s Office served on the multistate coalition’s Executive Committee to investigate allegations that AT&T’s billing practices facilitated third-party content providers’ mobile cramming. In addition to Texas, the Executive Committee team included attorneys general from Vermont, Florida, Maryland, Delaware, Washington and Oregon.

Attorney General's agreement with AT&T Mobility
Under the agreement negotiated by Texas and the Executive Committee, AT&T agreed to settle the states’ claims for a total nationwide payment of $105 million – including $5 million to the Federal Communications Commission and $20 million to the states. Texas will receive the highest share of the $20 million payment – approximately $1.17 million. One third of Texas’s share will reimburse the State’s legal fees, with the remaining two-thirds of the funds disbursed as civil penalties to the Texas Judicial Access Fund.

As part of this legal action, AT&T has changed their business practices and will no longer bill for third-party Premium Short Message Services – which led to the unlawful cramming -- and will be isolating other third-party billing charges on customer bills. In addition to allowing customers to more clearly see the remaining third-party charges on their bills, AT&T is also implementing a new system to ensure they obtain the express consent of customers prior to a purchase, and will thus provide an electronic receipt to customers upon purchase.

$80 million global restitution fund

The national agreement also requires AT&T to make an $80 million payment to the Federal Trade Commission to establish a nationwide restitution fund. The FTC will oversee administration of the fund to compensate current and former AT&T customers who were improperly billed for third-party content providers’ products and services.

Refund distribution process

Beginning today, customers can submit claims under the FTC’s refund program by visiting www.ftc.gov/att. On that website, customers can find more information about the claims process and complete a claim form. To determine their eligibility for a refund, customers can visit the claims website or contact the FTC’s refund contractor at (877) 819-9692 for more information.

Summary of agreement’s injunctive terms

In addition to requiring monetary payments to the states, the FTC and the FCC, today’s agreement requires AT&T to implement a new process for detaining customers’ express consent to incur third-party charges. AT&T must display those charges in a clear, dedicated section on the customer’s bill. Among its terms, the agreement also requires the wireless telecommunications carrier to take the following actions:

Clearly disclose customers’ ability to block all third-party charges;

Notify customers each time a third party is placing a premium text messaging service charge on their account;

Provide customers who dispute a third-party charge – if the charge is not older than six years and has not been previously refunded – with a full refund or access to the customer’s express consent of the charges;

Implement a new tracking system to monitor customers’ disputes of third-party charges; and Cooperate with future multistate investigations – particularly states’ subpoena requests for information from the new tracking system.

The Texas Attorney General’s Office has earned a national reputation for its aggressive efforts to end the practice of mobile phone cramming. Since 2011, the Internet and Privacy team of the Texas Attorney General has taken the following enforcement actions against entities charged with using deceptive practices to enroll mobile phone customers unknowingly for unwanted subscription services:

State of Texas v. Eye Level Holdings d/b/a JAWA et al. – In May 2012, a Travis County district court ordered defendants Eye Level Holdings, LLC; Cylon, LLC; Jason Hope; and Wayne DeStefano to pay the State of Texas $2 million in settlement of the State’s 2011 legal action alleging that they improperly billed wireless customers in Texas.

State of Texas v. Cellzum et al. – In July 2014, the Texas Attorney General’s Office settled with California-based text messaging content provider Cellzum over the company’s misleading Texas cellphone owners into unknowingly enrolling in premium short messaging services that added a monthly $10 fee to their mobile phone bills.

State of Texas v. Mobile Messenger U.S. et al. – In November 2013, the State charged four text-messaging content providers and their billing aggregator, Mobile Messenger U.S. Inc., with participating in a massive effort to deceive customers and wireless carriers regarding the identity of content providers in order to facilitate continued deceptive and misleading marketing. The case remains pending in Travis County district court.

In November 2013, following Texas’s legal action against Mobile Messenger, the four largest mobile carriers announced they would cease offering products and services through the premium short messaging services platform – the source of the majority of customer complaints about unauthorized third-party charges on mobile phones.

Attorney General Abbott urges all wireless phone customers to review all charges that appear on their monthly bills to ensure the charges are legitimate. Texans who find improper or unauthorized charges may file a complaint with the Attorney General’s Office at (800) 252-8011 or online at www.texasattorneygeneral.gov.